INDIA GETTING SERIOUS ABOUT SAARC

C O N F I D E N T I A L SECTION 01 OF 04 NEW DELHI 002323 SIPDIS SIPDIS DEPT PASS TO USDOC AND USTR E.O. 12958: DECL: 04/04/2016 TAGS: PREL PGOV ETRD ENRG ECIN EAID IN AF BG BT NP, PK, SL SUBJECT: INDIA GETTING SERIOUS ABOUT SAARC REF: NEW DELHI 1324 NEW DELHI 00002323 001.2 OF 004 Classified By: PolCouns Geoff Pyatt for Reasons 1.4 (B, D) ¶1. (C) Summary: PolCouns and Poloff's April 4 introductory call on Preeti Saran, the new MEA Joint Secretary for SAARC, revealed an element in the GOI that is generally upbeat about SAARC's potential to improve regional cooperation, in line with Prime Minister Singh's long-term vision of Indian leadership in South Asia and beyond. Ms. Saran's apparent interest in advancing India's role as a regional leader and her frankness about what the GOI needs to do to achieve this goal suggests and increasingly sophisticated MEA view of SAARC and related regional issues. Saran noted that there are some critical junctures ahead for both SAARC and the South Asian Free Trade Area (SAFTA),and voiced her concerns about Pakistan's preparedness to implement SAFTA. She took on board US interest in SAARC observer status and Afghanistan's membership in the regional body, and explained that the modalities for this would be discussed at the technical level in SAARC over the next few months and by the Council of Ministers' meeting in July. End Summary. Reiterating Support for US Observer Status in SAARC -------------- -------------- ¶2. (C) In an April 4 meeting with PolCouns and Poloff, MEA Joint Secretary for SAARC Preeti Saran confirmed the GOI's support of SAARC observer status for the United States, agreeing with PolCouns that now is the time for the U.S. to pursue it. However, Saran noted that the SAARC members had yet to decide on the framework for observer status--i.e. what roles and what level of participation would be granted. Saran mentioned that she had been investigating how the EU model works and asked us for details about NAFTA modalities. She observed that it was a bit "peculiar" that the SAARC countries had agreed to accept observers and a new member without deciding what those categories would entail. Modalities For Observer Status: A Blank Slate -------------- ¶3. (C) Saran reported that the GOI had not yet formed an opinion of how observer status should function. Saran predicted that she and her counterparts would start establishing modalities at a working level meeting on April 18-19 in Dhaka, where she expects to learn more about the other SAARC members' expectations for observers. The July SAARC Council of Ministers' meeting, will be the regional group's first opportunity to finalize the framework, at which time the group would consider other models, she said. Saran was guardedly hopeful that these membership and observer modalities would be defined easily, noting that her interactions within SAARC had always been "comfortable and amiable," and that the Bangladesh government is also eager to finalize important decisions by June or July ahead of national elections later this year. However, she also pointed out that it would take some "intense" technical level meetings to get the framework in order, and that SAARC's accession by unanimity clause could cause problems. Agreement About Afghanistan NEW DELHI 00002323 002.2 OF 004 -------------- ¶4. (C) Saran stated that SAARC has not met to begin the process of Afghanistan's accession to the group, but she reaffirmed the GOI's commitment to bringing Kabul into the fold, noting that Afghanistan "completes the South Asian identity." Saran agreed that economic and political connectivity with the rest of South Asia is key to normalization in Afghanistan. She was pleased to report that Afghanistan was included in a meeting of SAARC delegates hosted by the German government last week. Saran reported that she believes the next opportunity to formally initiate Afghan membership would be the Ministerial in Dhaka this summer, and the first opportunity for Afghanistan to participate would be 2007, at the summit that will New Delhi will host. Skeptical About Pakistan's Intentions -------------- ¶5. (C) Saran assessed that the Pakistan Commerce Minister's recent statement that Indo-Pak trade would continue to be governed by the bilateral agreement "nullifies SAFTA in one fell swoop." She was surprised by the GOP stance, she said, because in the 12 meetings held to negotiate SAFTA, Pakistan never said India would be left out of implementation. Saran maintained that regional trade cannot grow or be as dynamic if one country blocks the process. Further, she noted that India's FTAs with Sri Lanka, Bhutan and Nepal, and its negotiations for the BIMSTEC trade area that includes Bangladesh, "just carve Pakistan out" (REFTEL). Saran allowed that Pakistan's decision to ratify SAFTA was a good one, but firmly stated that "Pakistan can't continue holding it (implementation) hostage." Saran agreed with PolCouns that Pakistan's business community appeared to have grown more confident about how it would fare under a freer trade regime with India, commenting that the economic logic behind free trade is compelling. She also acknowledged that if Pakistan applies SAFTA to trade with India, Islamabad will have granted de facto MFN status to New Delhi. However, Saran claimed that the establishment in Pakistan is still hostile toward India and sees SAFTA ratification as a "gift" to India to be given only after other issues (Read: Kashmir) are settled. She averred that, come the Council of Ministers meeting this summer, the GOI will be looking closely at the number of items the GOP puts on its sensitive list as an indication of Islamabad's commitment to SAFTA. She added that attitudes and outcomes at the upcoming Ministers' meeting would determine the tone and pace of SAFTA implementation. ...But Also Sees Need for GOI Action -------------- ¶6. (C) Saran bemoaned the long implementation periods and "Sensitive List" that limit SAFTA's impact, saying, "how can we call this free trade?" She criticized the Indian Commerce Ministry, calling it "defensive, but for no reason." Observing that there is much room for improvement in SAFTA, Saran argued that the larger countries need to play a role in moving things forward. She also noted that emphasis had wrongly been placed on sensitive lists; Saran confided that the GOI's main fear regarding SAFTA was related to misuse of NEW DELHI 00002323 003.2 OF 004 he rules of origin, because sensitive lists can be continually revised. Without specifically acknowledging India's track record on regional trade barriers, Saran noted that "we still have to work on trade facilitation." Generally "Bullish" on SAFTA Prospects -------------- ¶7. (C) In spite of her near term concerns about SAFTA implementation, Saran described her attitude toward regional trade liberalization as "bullish." She predicted that "once trade takes off, the benefiting countries would look to reduce trade barriers and pursue customs harmonization." Pointing to the Sri Lanka-India FTA as an example, Saran was confident that India's neighbors would similarly experience a surge in exports as a result of SAFTA. In particular, she recalled India's initial apprehension about liberalizing trade with China, and commented that economic engagement can help change attitudes. Saran added that it might look as though all South Asian countries export the same kinds of items, but, as she pointed out, lower trade barriers could allow for vertical integration across the subcontinent and help countries to maximize their comparative advantages within a given industry. She concluded that it's a "win-win" situation. Interested in Broadening SAARC Activities -------------- . ¶8. (C) Commenting that SAARC has not yet undertaken a regional project, Saran was very interested in learning more about USAID's South Asia Regional Initiative for Energy (SARI/Energy). She was particularly interested in project implementation in the context of the group, and responded favorably to the prospect of receiving more information about the history and activities of the project from our USAID mission. Bio-Notes: Preeti Saran -------------- ¶9. (C) Saran just completed a tour in Geneva as India's representative to the World Intellectual Property Organization. Her past experience at the multilateral organization and her clear interest in and understanding of the technical issues involved in SAFTA indicate that she will be a more able interlocutor as the MEA's Joint Secretary for SAARC. She is married to Pankaj Saran, MEA's Joint Secretary for Nepal and Bhutan, but is not related to Foreign Secretary Shyam Saran. Comment: SAARC Finally Getting Traction in GOI -------------- - ¶10. (C) Saran's comments about SAARC and her apparent commitment to its potential suggest that the MEA is serious about using SAARC to engage India's neighbors in a way that the group has not been used before. As Saran indicated, bureaucratic hurdles, such as in the Commerce Ministry's protectionist instinct, will need to be overcome, but she seems well-placed to handle the task. ¶11. (U) Visit New Delhi's Classified Website: (http://www.state.sgov.gov/p/sa/newdelhi/) NEW DELHI 00002323 004.2 OF 004 MULFORD